State of Estate Tax

As we are one month into 2014, it is worth discussing the current state of the Estate Tax. A little over a year ago, the US Congress passed the American Taxpayer Relief Act (“ATRA”) of 2012 which froze the exemption amount at $5,000,000, indexed for inflation in future years, with a top tax rate of 40%. For 2014, the Federal exemption amount is $5.34 Million, or $10.68 Million for a married couple.  Therefore, most middle class and even upper-middle class families would be relieved from a Federal Estate tax burden.  

However, many states, including New York and New Jersey, have an independent estate tax and thus are looked at as the “more expensive” places to die.  Currently, the New York estate tax exemption amount is $1 Million and New Jersey’s is $675,000, the latter of which is the least favorable in the country. As many of these states are seeing a departure of their middle class to states with no independent estate tax, legislators are taking notice, and notably, Governor Cuomo is looking to bring New York’s estate tax in line with the Federal.   Maybe New Jersey will follow suit, but only time will tell.  In the meantime, it is still important to have an estate plan in place which would result in minimal estate taxes.  There are options available, including but not limited to, gifting (including leveraged gifts) and the inclusion of a “credit shelter trust” in one’s testamentary document which would enable a surviving spouse to make an election to preserve the deceased spouse’s credit amount. 

While the Federal Estate Tax may not be the hot topic it was a few years ago, it is hard to forget the uncertainty that surrounded it over the last five years.  However, a recent New Jersey Supreme Court decision made it clear that the Court would not consider the estate tax ramifications had a decedent died in a succeeding year with a higher exemption amount (or in the case of 2010, no federal estate tax) in calculating pecuniary damages in a wrongful death claim.

The writing above was produced as a synopsis of Michael Booth’s New Jersey Law Journal Article published on Janauary 28, 2014 entitled, “Estate Taxes Not Pecuniary Injuries, Court Holds in Wrongful Death Case”.

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By Nicole E. Russak, Esq.

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